Moody's (MCO) Q1 FY26 earnings call: guidance and Q&A

How many customers are accessing Moody's data through LLM channels, and what are the plans to monetize this distribution?

Management stated that a number of large financial institutions are trialing agent-ready data through MCPs or direct integration into their internal AI workflows. This creates opportunities to upgrade commercial models, as customers seek enterprise-wide access to Moody's intelligence. It's in early days, with efforts to convert trials to sales throughout the year.

“if they want to bring our intelligence into the corporate and investment bank, we need to make sure that there's an arrangement and a license that allows them to access that content across that entire division as opposed to in the past, we may have had been serving different use cases in different parts of the bank.”

asked by Keen Fai Tong · answered by Robert Fauber

How much of the MIS operating leverage is driven by technology innovations and AI efficiencies, especially given strong margin expansion despite softer revenue growth?

Management attributed margin expansion to prior technology investments, workflow automation, and now AI integration in analyst groups for tasks like financial statement spreading and data gathering. This allows analysts to focus on credit analysis, improving efficiency and supporting record issuance volumes. AI enablement also provides new insights for ratings quality and research.

“We've enabled them to be more efficient, avoiding repetition in different tasks... And now we're adding AI to those workflows in large parts of our analyst groups to help allow them in areas like financial statement spreading, data gathering, all the information, again, that precedes the the Ratings Committee moment.”

asked by Scott Wurtzel · answered by Noemie Heuland

Was there any pull-forward of issuance in Q1, or have there been recent delays, and when might deferred debt be issued?

Management indicated no more pull-forward than typical ranges, noting that investment-grade issuers have constant market access, while spec-grade issuers might have slightly more. Despite choppier markets, spreads have recovered, and the market is open. A backlog of Q1 deals has been deferred into Q2, with optimism for recovery in May and June, driven by attractive funding costs and strong investor demand.

“There is a backlog of Q1 deals that we have heard this from the bank. Some of these deals have been deferred into the second quarter. And I think there's some optimism that we're going to see some of that come back in May and June.”

asked by Jeffrey Silber · answered by Robert Fauber

Are there any regulatory pushbacks or gating factors for internal AI adoption in ratings or analytics, given the progress made?

For ratings, management maintains active dialogue with regulators who expect transparency and strong control environments around AI deployment, especially concerning AI making decisions. For analytics, customers (banks, insurers) also expect strong control environments and AI governance, often auditing Moody's products. This heightened scrutiny means adoption with regulated institutions can take longer.

“When it comes to, hey, I've got an AI model that's actually going to make a decision about who's going to get a loan, who's going to get an insurance policy at what price, what a credit rating might be, there's a lot more sensitivity around that, as you'd expect, because there's questions about the model -- does the model have bias, how is the model being governed, what kind of data is going into the model?”

asked by Andrew Nicholas · answered by Robert Fauber

Given the 80% YoY growth in private credit-related revenue, is there a pipeline build, and how does Moody's size this portion of growth?

Management explained that increased credit stress in private credit drives demand for independent credit assessments, as investors seek third-party validation. While some deals shifted to public markets due to cheaper funding, massive underlying funding needs persist. The growth is seen across both Ratings (80% YoY) and Analytics (credit scoring tools), positioning Moody's well to serve the entire ecosystem.

“when there's more credit stress in the market, there is more interest and demand in our ratings and in our solutions. And that is exactly what we are seeing right now.”

asked by Peter Christiansen · answered by Robert Fauber

Is the Q1 transactional revenue level ($17 million) a new run rate, and will overall MA growth converge with ARR/recurring revenue growth in 2027, or is more lumpiness expected?

Management confirmed the Q1 transactional revenue dip was expected due to the learning solution divestiture and the strategy to move services/integration work to partners. This trend of declining transactional revenue is expected to continue through 2026 and 2027. Organic recurring revenue growth is already closely aligned with ARR, and while some lumpiness from on-premise software recognition can occur, the overall trend is towards convergence.

“You'll continue to see that carrying through '26 and '27. However, if you look at, again, organic constant currency growth for recurring revenue, that's really much aligned now with ARR, you can have a few lumpiness in a given quarter if we have on-premise revenue recognition for long-term software arrangement that could create a little bit of variation.”

asked by Alex Kramm · answered by Noemie Heuland

Given the current revenue guidance, what is the expected relative mix or weighting of ratings issuance and revenue for the first and second halves of 2026?

Management expects issuance to grow high single-digit percent in H1 2026 YoY, then decline mid-single-digit percent in H2 2026 YoY (including bank loan repricings). Sequentially, issuance is projected to decline mid-teens from Q1 to Q2, be flat Q2 to Q3, and decline mid-20s Q3 to Q4. Revenue is expected to show low double-digit growth in H1 YoY and mid-single-digit growth in H2 YoY.

“So in the first half, something like low double-digit percent revenue growth in the first half. And then for the second half, we're expecting something like mid-single-digit percent revenue growth.”

asked by Curtis Nagle · answered by Robert Fauber